INCOME TAX (AMENDMENT) BILL

Order for Second Reading read. 4.44 pm

The Minister for Finance (Dr Richard Hu Tsu Tau): Mr Speaker, Sir, I beg to move, "That the Bill be now read a Second time."

Sir, the Income Tax (Amendment) Bill 1998 seeks to give legislative effect to the income tax changes announced in the February 1998 Budget Statement. Opportunity is also taken to incorporate four other amendments to the Income Tax Act.

I shall begin with the tax changes announced in the Budget Statement. There are a total of 11 tax changes which require amendment to the Act. I have introduced a number of new tax incentives in the 1998 Budget and they are:

(a) a tax concession to promote the bond market;

(b) a tax concession package to help Singapore develop as an electronic commerce hub;

(c) tax exemption on income for approved insurance companies deriving from writing offshore marine hull and liability insurance;

(d) tax exemption on income derived from uplift of freight from Singapore;

(e) one-year accelerated depreciation allowance for companies which acquire approved equipment or technology which meet certain criteria relating to noise and chemical exposure levels and, finally,

(f) a further tax deduction to companies for approved relocation and recruitment expenses incurred in the hiring of talent from abroad.

Clauses 5, 6, 11, 13, 17 and 20 amend the Act to provide for these incentives.

I have also announced the extension and liberalisation of several existing tax concessions. Clauses 3 to 5, 7, 10, 12, 14, 16, and 21 amend the Act to provide for the following:

(a) extension of the tax holiday granted to the Singapore International Monetary Exchange Limited (SIMEX) for another five years;

(b) extension of the current 10-year limit for venture capital funds to enjoy tax exemption on the gains from the disposal of investments, for a further five years;

(c) extension and liberalisation of the Tax Exemption Scheme for Syndicated Offshore Credit and Underwriting Facilities for a further five years;

(d) liberalisation of the tax concession for the unit trust industry; and

(e) removal of the yearly restrictions in the tax deduction limits for general provisions made by banks.

Tax Changes Not Announced in the 1998 Budget Statement

I shall now deal with the four tax changes that were not announced in the 1998 Budget Statement.

The first tax change pertains to tax deduction for donation of computer equipment. At present, companies that donate computer equipment to educational and research institutions are allowed a tax deduction equal to the value of the donation. The scheme is to encourage companies to donate computer equipment to these institutions to help them upgrade and maintain the quality of information technology training at the forefront. To enable other organisations to also keep pace with the developments in information technology, I have decided to extend the tax deduction scheme to include donation of computer equipment to public libraries, community centres and voluntary welfare organisations. Clause 15 amends section 37(2) of the Act to provide for this extension.

The next tax change relates to the promotion of trading of Singapore goods and services. Currently, double tax deduction is granted for expenses incurred in the promotion of Singapore goods and services. As the current provision in the Act is rather restrictive with regard to the type and extent of expenses incurred that would qualify for the double tax deduction, clause 8 amends section 14B of the Act to provide for more flexibility in order to encourage the trading of Singapore goods and services.

The third tax change relates to the tax incentives I announced in the 1995 Budget to promote offshore leasing of aircraft. Under the incentive package, aircraft leasing companies that operate from Singapore are taxed at a concessionary rate of 10% on their income derived from offshore aircraft leasing. To further boost the attractiveness of Singapore as a location for aircraft leasing companies, I have decided to extend the tax concession to cover the income derived by approved aircraft leasing companies from aircraft management activities. Clause 19 amends section 43I of the Act to provide for this extension.

Finally, the last change is to improve tax administration. At present, the Act requires a person carrying on a trade or business to issue receipts and maintain records of such receipts issued for tax purposes. However, the Act also provides for the Comptroller of Income Tax to waive such a requirement for businesses such as fast food restaurants where the turnover is high but the value of each transaction is low, subject to the company being able to satisfy certain conditions. For ease of administration, clause 2 amends section 2 of the Act to enable the Comptroller of Income Tax to delegate the power to approve such requests to the Deputy Comptroller or an Assistant Comptroller of Income Tax.

Sir, I beg to move.

Question put, and agreed to.

Bill accordingly read a Second time and committed to a Committee of the whole House.

The House immediately resolved itself into a Committee on the Bill. - [Dr Richard Hu Tsu Tau].

Bill considered in Committee; reported without amendment, read a Third time and passed.